The world's economy is in bad shape, but the U.S. and Europe appear to be more interested in settling political scores than dealing with a threatening situation. Europe's economy is stagnating. The U.S. is growing far below its potential, pushing unemployment higher. The dollar is sliding, perhaps too fast, and the euro is rising, probably too much. China is seizing up thanks to severe acute respiratory syndrome (SARS). The world is adrift, without economic leadership, while the U.S. and Europe are focused on punishment and vindication over Iraq. It's time for both sides to get serious and begin to solve economic problems jointly before it's too late.
Take free trade. One way to jump-start the global economy would be to bring a successful conclusion to the Doha round of trade talks now under way. The key issue is cutting the enormous subsidies that Europe and the U.S. give to domestic agriculture and allowing developing countries to compete in these markets. A deal would save taxpayers billions of dollars, boost exports from Latin America and Africa, and increase trade. Both Paris and Washington would have to agree to major cuts in farm support to make this work. But France's highest priority on the international scene appears to be keeping U.N. Security Council sanctions on Iraq until chief weapons inspector Hans Blix reports on weapons of mass destruction. With Saddam out, it's an absurd, legalistic position designed to vindicate France's prewar opposition to the U.S. invasion of Iraq. Washington fiercely objects. The economic fallout from this political tension is that neither side is willing to make a move at Doha.
Washington, for its part, is punishing countries that opposed it during the runup to war. In effect, it is politicizing its free-trade policy. Chile, a champion of free trade in Latin America for years, didn't support the U.S. on the second U.N. resolution on Iraq. That nation is being pushed to the back of the line of countries hoping to establish bilateral free-trade pacts with the U.S. Mexico and Canada didn't support the U.S., either. Will they, too, be punished economically by Washington?
Europe and the U.S. must stop the political bickering over Iraq and get back to business. Both have to acknowledge that, like it or not, we all live in a multilateral economy. CEOs know that there can be no unilateralists in a global business world. There is a Group of Eight economic summit in June. It's time to focus on a plan that spurs economic growth. It's time for economic leadership.